Are there bubbles in the vanilla price?

Author:

Khan Khalid,Su Chi-Wei,Khurshid Adnan,Umar Muhammad

Abstract

AbstractThis paper investigates the presence of the bubbles that are experienced in the global vanilla (VNL) price, using the GSADF approach. The results show that there are five bubbles in the VNL price that are driven by specific reasons. Also, in this regard, the opening and ending points of each bubble coincide with specific events that contribute toward the formation, as well as the rupture of the bubbles. It has also been noted that the cyclone Hudah and the monopoly of the cartels trigger the first bubble, while the regulation and export taxation policy drive the second bubble. However, market-oriented policies, the abolition of cartels, and the exchange rate adjustments are the leading factors that form the third bubble. Furthermore, political instability, hurricanes and bad weather are the key factors driving the fourth bubble. And finally, the rising global demand and decreasing supply, price speculation, poor quality, and cyclone Enawo create the last bubble. It needs the VNL market to be more stable in order to continue supply, which can then control the price fluctuations. The minimum role of the cartels and middlemen is vital for VNL price stability. Therefore, the governments should ideally facilitate the big companies to directly negotiate with farmers which may be beneficial for both companies and the farmers alike.

Publisher

Springer Science and Business Media LLC

Subject

Economics and Econometrics,Agricultural and Biological Sciences (miscellaneous),Food Science

Reference50 articles.

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4. DANWATCH (2018) Price volatility hurts both vanilla farmers and companies. https://old.danwatch.dk/en/undersogelseskapitel/ekstreme-prisudsving-skader-vaniljeboender-og-virksomheder/

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